London Forex Report: Oil Bid Supports Sentiment

London Forex Report: Oil Bid Supports Sentiment

London Forex Report: Oil continues to take center stage, rising to the $45/ barrel mark Friday on hopes prolonged weakness in oil prices will continue to force smaller producers out and help reduce supply glut although little has changed on the fundamental front. The first glimpse of PMI reading for the month of April showed manufacturing activities softened a tad. PMI manufacturing in the US surprisingly eased to 50.8, its lowest since Sept-09 dragged by lower production and new orders. On a similar note, PMI manufacturing weakened a notch to 51.5in the Eurozone, implying growth in the manufacturing sector and the two countries is expected to remain very moderate. USD extended its rebound on continued risk-off market sentiment. The USD Index rose 0.55% to 95.11, lifted by continued sell-off in European majors and JPY, as well as soft equity market.

EURUSD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish

Fundamental: EURUSD continued to pose losses after last Thursday’s ECB rate decision meeting, where President Mario Draghi stated that interest rates would need to be kept low for an extended period of time while also stressing the downside risks to the Eurozone outlook. Amid the dovish tone set by ECB, EURUSD reached low of 1.1216, the weakest level since 29 March

Technical: Anticipated retest of bids at 1.1220 attracted buyers on the initial test while 1.13 acts as resistance bears target 1.1140 as the next downside objective . Only over 1.14 negates near term bearishness.

Interbank Flows: Bids 1.1140 stops below. Offers 1.14 stops above
Retail Sentiment: Neutral
Trading Take-away: Neutral

GBPUSD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish

Fundamental: GBP ended last week as the top performer among the major currencies, ignoring the weak UK jobs and retail sales data. GBPUSD touched an intraday high at strong resistance level of 1.4450 before retreating back to 1.4401. A forecast released Thursday indicated a 20% risk of a vote to leave the EU, down from 24% in the previous week. Easing concerns around Brexit are also helping to lift the sterling.

Technical: Initial test of offers over 1.4450 as expected stalls the advance. While 1.43 supports bulls target a broader symmetry swing objective at 1.4670. Failure at 1.43 opens a near term base test at 1.4240 next.

Interbank Flows: Bids 1.43 stops below. Offers 1.4450 stops above
Retail Sentiment: Neutral
Trading Take-away: Neutral

USDJPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish

Fundamental: JPY weakened sharply on the back of BoJ rumors and ended last week as the worst performer. USDJPY gained over 200 pips on Friday as markets consider the potential for an announcement of banking sector support via negative interest rate loans in this week’s BoJ monetary policy meeting. Heading into the BoJ meeting, JPY weakness might be further exacerbated by a heavy unwind in record long JPY positions shown by CFTC.

Technical: While 110 now acts as supports expect a stronger test of 112 offers, breach of 110 support suggests false upside break and opens a move to retest year to date lows.

Interbank Flows: Bids 110 offers below. Offers 112 stops above
Retail Sentiment: Neutral
Trading Take-away: Neutral

EURJPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish

Fundamental: In Japan, factories production contracted again in April evidenced by the slump of manufacturing PMI to a record low of 48.0 in April (March: 49.1). A different report suggested that the services sector was also losing steam. Tertiary industry activity index fell 0.1% MoM in Feb (Jan: +0.7% MoM), signaling broad based sluggishness in the economy.

Technical: Bears now target weekly symmetry objective at 120.60, resistance is sited at 125.50. Only a close over 126.80 eases immediate downside pressure.

Interbank Flows: Bids 123.30 stops below. Offers 125.50 stops above
Retail Sentiment: Neutral
Trading Take-away: Neutral

AUDUSD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish

Fundamental: Having posted strong gains early last week, the Australian dollar continued to retreat for three consecutive days managing to find support at 76 US Cents. Australian markets are closed today for Anzac Day. On the domestic front, markets will be looking at Australian Q1 CPI due Wednesday. CPI in Australia is expected to edge up 1.8% YoY in Q1, closer to RBA’s 2-3% target band. If data appears in line, this may deter the RBA from considering further rate cuts in the near term.

Technical: While .7680 supports the advance bulls target .7880 as the next upside objective, failure at .7650 opens a move back to test .7470.

Interbank Flows: Bids .7500 stops below. Offers .7800 stops above
Retail Sentiment: Neutral
Trading Take-away: Neutral

USDCAD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish

Fundamental: USDCAD remained steady last Friday in the broad range of 1.2650 to 1.2750, ending the week at 1.2668. Both domestic retail sales and CPI data released last Friday surprised the markets on the upside. With retail sales figures expected to show negative growth rates, an increase of 0.4% MoM was recorded for the month of February. CPI in March came in at 0.6% MoM against 0.3% expected.

Technical: While prior support at 1.2740/60 acts as resistance expect a test of bids at 1.2560 as the next downside objective

Interbank Flows: Bids 1.26 stops below. Offers 1.28 stops above
Retail Sentiment: Bullish
Trading Take-away: Short

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